EurObserv?ER: The wind power industry takes on the crisis

The wind energy industry is also attracting increasing political support, through national commitments to reduce greenhouse gases and through job creation prospects. Investors and banks are coming round to viewing wind power as a hedge against inflation because incentive systems have been set up in many countries mitigating the associated financial risks. In contrast, lending packages and project profitability are more harshly assessed, resulting in the shelving of less profitable or higher-risk ventures, so some projects have had to be cancelled, playing havoc with manufacturers’ order books.

Another market trend is that the wind power market has gradually slipped into the clutches of major investors (utilities, oil companies and major independent producers) over the last four to five years. The credit squeeze has primarily cushioned the European energy majors (RWE, Dong Energy, Vattenfall, Statkraft, Iberdrola, Enel, EDF, EDP and E.ON) at the expense of independent producers who have had to relinquish some of their assets to them.

One of the crisis-beating solutions the European manufacturers have come up with is to invest in new production capacity in countries with booming wind power markets, such as the United States, China or India. Some have even been forced to relocate part of their European production capacity to these new wind energy markets.

The European industry also has an excellent position on the very promising European offshore market, whose specialist manufacturers have developed new, more powerful, higher-performance wind turbines that require less maintenance. They are counting on using their head start in technology to drive their expansion in the European market.

News from the leading players

Vestas aiming to earn 7 billion in 2010
In 2009, the Danish manufacturer produced and sold 3 320 wind turbines for a total capacity of 6 131 MW, which is about the same as the previous year’s sales (6 160 MW). It should thus lose market shares to its main competitors. Although the company’s earnings were below target, they rose 10%, to 6.6 billion euros (6 billion in 2008) giving a trading result of 856 million euros, up by 28%. At the end of the day the company’s profits were up 13% to 579 million euros.

At the end of 2009, the company had 20 730 people employed worldwide – 14 161 in Europe, 4 316 in Asia (including Asia Pacific) and 2 193 in the Americas. Vestas has downgraded its 2010 growth prospects with expected sales of 7 billion euros (as against its initial forecast of 7-8 billion) with a 10-11% operating margin, arguing that some of its firm orders (for 8-9 GW) will be at the end of the year, which will squeeze part of the earnings allocated to 2010.

The manufacturer has had to make strategic choices to stay profitable, such as relocating part of its manufacturing from Denmark to the two main buoyant markets, namely the US and China . This year the manufacturer had to lay off 1 150 Danish workers and close a blade manufacturing plant in the UK with a loss of 425 jobs.

It invested US$1 billion in the United States on 4 manufacturing plants in Colorado State – two to make blades, 1 to make nacelles and another for tower manufacturing. They should all be operational this year with annual output of 4 000 blades, 1 400 nacelles and 900 towers respectively. The company plans to employ about 4 000 people across North America in 2010. Vestas has also invested heavily in China in its Tianjin Economic Development Area manufacturing centre, which was inaugurated in 2006 when the first blade factory was built and has become a full wind turbine production base (nacelles, generators, blades, control systems, and so on).

The new investments run up to US$220 million, making a total of US$380 million invested in this centre. By the end of 2009, Vestas’ total investment in China had exceeded US$439 million (3 billion CNY).

The manufacturer also has a very high profile in the European offshore wind energy market where it had a cumulated market share of about 40% at the end of 2009. Last August it clinched a new order for 55 of its V90-3MW wind turbines for the Belgian Bligh Bank wind farm which will be located 46 km off Zeebrugge.

Looking to technical developments, the company started marketing two new wind turbines in February 2009 – the V100-1.8 MW and the V112-3 MW, which will be ready for installation on sites with low and medium wind conditions in 2010 and 2011. An offshore version of the V112-3 MW is also available, which is at its best when wind speeds are up to 9.5 m/s. A new prototype of its V60-850 kW turbine was presented in April 2009. The first order for this wind turbine, which will be manufactured in the Vestas Hohhot facility, Inner Mongolia, was placed in December 2009. Vestas is also working on developing a 6-MW offshore wind turbine, but has yet to announce its launch date.

GE Energy scouting for new markets

The American manufacturer, which has a commanding position in its domestic market with over 40% in 2009 (around 4 GW installed), is competing with Vestas for the global leadership. GE Energy has clinched some major orders for 2010, while the ranking of the main manufacturers for 2009 is being finalised, including the supply of wind turbines for the biggest US wind farm in Oregon.

The 845-MW capacity farm will soak up US$1.4 billion of investment and will be equipped with GE 2.5xl, the company’s new flagship turbine. The American manufacturer will also deliver 101 turbines to the CEZ Group supply authority, which is planning to construct Europe’s biggest onshore wind farm in Romania. This 600-MW farm will call for investment to the tune of 1.1 billion euros. GE also operates in the Chinese market.

As recently as 12 January, the company announced that it had signed a contract to deliver 88 class 1.5 MW wind turbines to HECIC New Energy Co., Ltd, one of the main Chinese wind turbine developers. This order will equip three onshore farms with accumulated capacity of 132 MW. GE has committed to supplying 895 1.5- MW wind turbines to China to date.

GE has also decided to set up in the very promising Indian market. It is currently constructing its first factory there, close to the city of Chennai (formerly Madras, in SE India). The factory’s annual production capacity will be 450 MW, including the production of the GE 1.5-MW wind turbine from the second quarter of 2010.

The company, which retreated from the offshore market in 2003 (the year the Arklow Bank wind farm was constructed in the Irish Sea), confirmed its renewed interest in the sector by buying out Norwegian manufacturer Scanwind for 15 million euros last October. GE is interested in acquiring the “direct drive” technology that has many advantages for this market, primarily with regards to parts wear.

Gamesa consolidates its positions

The Spanish manufacturer fared slightly worse than expected in 2009 and is prepared to see a possible contraction in its third-quarter sales from 3 684 MW to 3 300-3 600 MW in 2009. Gamesa is planning to consolidate its positions in the main emerging markets in 2010. Accordingly, the company has commenced construction of its first manufacturing centre in Chennai, India, initially with 200 MW of production capacity. Gamesa hopes to meet the rising needs of the Indian and neighbouring countries’ markets.

Gamesa is also pursuing the adjustment of its product offer to the specific needs of each market, by significantly increasing the capacity of its US and Chinese manufacturing plants. Hence Gamesa started producing its first 2-MW G90 units in the US and raised its US production capacity to 1 200 MW in the third quarter.

At the same time, Gamesa has pressed on with the industrial development of its 2-MW G8x in China by adapting its nacelle and turbine
assembly plant and by seeking strategic partnerships in the region for the supply of blades and gearboxes. This development should be finalised in the course of the first quarter of 2010 and increase the company’s Chinese production capacity to 1 000 MW spread over two manufacturing platforms on its Tianjin site – the 0.85-MW G5x and the 2-MW G8x.
The Chinese market is particularly promising. Last June, Gamesa and its Chinese partner, China Guangdong Nuclear Wind Co signed an agreement to develop 253-MW of wind turbine projects in the Shandong region to be delivered over the 2009-2011 period. In the wake of that, Gamesa entered into another agreement with Huadian New Energy Development Co, for the delivery of 300 MW (850-kW G5x and 2.0-MW G8x wind turbines), also to be delivered over the 2009-2013 period for projects in the Autonomous Region of Inner Mongolia.

Turning to Europe, Gamesa took full advantage of the growth of its domestic market in 2009 with, according to AEE, 845.2 MW installed, namely a 34.4% market share. The company is also very well-placed in the Italian market, which it considers as one of its strategic markets.

In 2009, the company signed two new contracts with Italian company Enpower 3, for the delivery and installation of 49, 2-MW G8x wind turbines for the Cattolica and Lercara 1 wind farms. The company also has a foothold in the Romanian wind energy market where it has sold 52 2-MW wind turbines for three wind farms in the Dobrogea region.

Looking at technical developments, in June 2009 Gamesa presented its new 4.5 MW class wind turbine prototype (the 4.5-MW G10x) which should deliver the equivalent of the electricity consumption of over 3 000 households every year. It will have a rotor diameter of 128 meters and a tower 120 meters high.

Enercon, a 7-MW turbine under surveillance

The German manufacturer is the only major independent wind turbine manufacturer and is not quoted on the Stock Exchange. Therefore data relating to the company’s business is harder to obtain. Nonetheless, it should have maintained positive growth in 2009, partly boosted by an increase in its market share of the domestic market (60.4% market share in 2009 according to DEWI).

The company made big headlines in November 2009 when it inaugurated the first five “direct drive” 6-MW E126 wind turbines at the Estinnes wind farm in Belgium. The farm, which will eventually have 11 machines, is outstanding because it features the most powerful wind turbines sold to date. What is more, these machines will actually be down-rated and could have a nominal capacity of 7 MW.

According to WindVision, its client, the wind farm should produce about 187 GWh per annum which is sufficient to supply 50 000 households. The company also has a strong foothold in the international markets (Canada, India, Australia) and in addition to its German manufacturing facilities (Aurich, Emden and Magdeburg), has plants in India, Brazil, Sweden, Portugal and Turkey.

Sinovel climbing upwards

The Chinese manufacturer has enjoyed a meteoric rise, carried – it has to be said – by the equally spectacular growth of its domestic market. It claims to have delivered 3 300 MW in 2009 which is twice as much as in 2008. Sinovel has made major research and development efforts to make up for lost time on the technological aspects of the multi-megawatt class of wind turbines, relying on an R&D facility that employs some 200 people.

Last year, Sinovel installed its first 3-MW class wind turbines on the offshore “Shanghai East Sea project” and a further thirty were being shipped and certified. The company is banking on this technology showcase to gain market share abroad as well as its well-proven SL-1500 turbine.

Siemens on all fronts

The Siemens acquisition of Danish manufacturer Bonus just over five years ago has paid off. Siemens Wind Power, which relocated the company headquarters from Denmark to Hamburg in Germany, forecasts sales of almost 3 billion euros in 2009 (2 935 million euros) which testifies to strong growth over 2008 (2 092 million in sales).

The company should have delivered 2 500 MW in 2009 as against a little less than 2 000 in 2008. Its order book is looking healthy as last year orders for at least 1 225 wind turbines for a capacity of over 4 000 MW (onshore and offshore) were placed with the German manufacturer. The company is in a perfect position in the offshore market, which is due to skyrocket in the next few years, and will rely on its 3.6-MW second generation offshore wind turbine, the SWT-3.6-120 to succeed.

The manufacturer’s order book is well filled, with, for example, the supply of 140 units of its SWT-3.6 MW-107 to the Greater Gabbard offshore farm, which will be the biggest offshore wind farm ever built when it is commissioned in 2011. It will also equip the London Array offshore farm with another 175 3.6-MW machines. Siemens is also very active in the onshore wind farm market. Last September, it clinched a contract with Scottish utility Airtricity for the delivery of 350 MW of class 2.3-MW turbines for a wind farm in Clyde, Scotland.

Siemens has also underpinned its presence in the United States where it has opened a second plant at Elgin, Illinois (gear boxes and other components). The plant will be built at an investment of US$20 millions and employ 300 people. Siemens is also constructing its first assembly plant on American soil in the centre-south of Kansas to deliver 650 class 2.3 MW wind turbines per annum year. Siemens which will take up US$5 million in inward investment aid will invest US$50 million and create over 200 jobs. Furthermore the company has a blade manufacturing plant in Iowa.

Siemens, which is thus present on all fronts, is also investing in China where it is constructing a factory at a cost of US$60 million in the city of Lingang, in the East of Shanghai Port. The facility will assemble nacelles and produce blades for its 2.3-MW and 3.6-MW wind turbines for the national and international markets.

Turning to technology, Siemens has challenged Enercon’s monopoly by installing a first gearbox-free wind turbine prototype, the SWT-3.0-101 DD (for Direct Drive) in the city of Brande in Denmark.

Other manufacturers are also very well represented in the European and global markets. Like Sinovel, Chinese manufacturers Goldwind and Donfgang, have a foothold in their domestic market.

The same applies to Indian manufacturer Suzlon, which is also in the American market. Suzlon takes also advantage of the growth of the German manufacturer Repower, in which it has a 91% share holding. The latter operates in both the onshore and offshore markets pulled off some major contracts in 2009 including an order for 954 MW (477 MM82/92 wind turbines) from EDF Énergies Nouvelles and RES Canada for wind farms to be installed in Québec between 2011 and 2015.

Repower is also highly active in the offshore market and is currently developing a new turbine with a capacity of 6.15 MW based on Repower 5M technology that is already in the market. This new turbine’s future is already assured with the signing of an agreement with RWE Innogy in February 2009, for the delivery of 250 offshore wind turbines.

In February 2010 RWE Innogy signed a contract for the supply of the first 48 6.15-MW turbines to be installed in the Nordsee Ost farm (295 MW capacity) between 2011 and 2013.

Other European manufacturers worth mentioning include Acciona Windpower which has three turbine manufacturing facilities with over 2 GW of production capacity – two in Spain and the third in Iowa in the US. Acciona produces and has already sold over 2 200 units of its 1.5-MW turbine and this year is to launch its first class 3 MW wind turbine, the 3-MW AW 1500.

Then there is Nordex, the German manufacturer, which has a strong foothold in the French market where it installed 715 MW during 2009. Nordex is also present in China where it manufactures the 1.5 and 2.5-MW class wind turbines specifically for the Chinese market. It will shortly have manufacturing capacity in the US with its first purpose-built facility in Arkansas. The nacelle assembly plant with 750 MW of production capacity will come on stream in the second half of the year and be fully operational in 2012.

EU – over 11 000 MW expected in 2010

Despite the economic crisis, the European Union wind power market has kept all its promises by establishing a new record for installations. Market growth should remain positive this year despite the continuing difficult financial situation. The main European markets are still being very actively backed by the general public’s awareness of the need to combat greenhouse gas emissions.

The market will also be able to rely on the expected takeoff a number of Central European markets (Romania and Poland) and the expected grid connection of over 1 GW offshore. Another promising factor is the expected decrease in the cost of wind turbines, which started in 2009 and that should accelerate in 2010. This reduction has been caused by a major decrease in raw materials prices (for example the price of steel halved between July 2008 and July 2009), and also because of the stronger presence of buyers with major financial capacities on the market, such as the electricity majors. These actors wield pressure on prices by ordering turbines in large quantities.

The reduction was expected after several years of steadily increasing machine prices (up 40-50% between 2004 and 2008) because of the increase in raw materials prices and demand constantly outstripping supply. Accordingly, EurObserv’ER is sticking to its European Union market growth forecasts at 15% for 2010, i.e. a cumulated base of around 86 000 MW.

The industry is even more optimistic about its longer term prospects. The adoption of the new European directive has made EWEA reassess its goals for the European Union in 2020. In the December 2009 issue of its “Pure Power” publication, EWEA estimates that installed capacity of 230 GW including 40 GW of offshore is feasible by that date, as against its previous goal of 180 GW. This capacity would theoretically deliver 582 TWh (433 TWh onshore and 148 TWh offshore), equivalent to the mean consumption of 131 million European households, and sufficient to meet 14.2% of the electricity demand, thus saving 333 million tonnes of CO2 every year.

The association has raised its goals for 2030 from 300 to 400 GW including 150 GW offshore which would correspond to the production of 1 155 TWh (592 TWh onshore and 563 TWh offshore), to the mean consumption of 241 million European households and meet 26 to 34.7% of the European Union member states’ electricity needs. It would annually avoid the release of 600 million tonnes of CO2 into the atmosphere. Growth of this magnitude will call for colossal investments at European scale in grid infrastructures, not only onshore but also offshore.

By relaying the onshore market, the offshore market should boost European growth. Another EWEA publication, “Oceans of opportunities”, puts the capacity of existing or forthcoming offshore wind farms at 100 GW, capable of providing 10% of Europe’s electricity and saving 200 million tonnes of CO2 every year. According to the association, installation of this magnitude of capacity would require the setting up of a pan-European grid interconnecting the various wind farms in the North Sea and Baltic Sea. A grid of this nature would enable the interconnected countries to increase their exchange capacities, while enhancing the security of their supply.

These goals may appear a long way off but they will depend on the decisions taken in the next few months. This is because the investments made in grid infrastructure in the years to come will determine the wind power growth rate and its contribution to the new European directive’s goals.

This barometer was prepared by Observ’ER in the scope of the “EurObserv’ER” Project which groups together Observ’ER (FR), ECN (NL), Eclareon (DE), Institute for Renewable Energy (EC BREC I.E.O, PL), Jozef Stefan Institute (SL), with the financial support of Ademe and DG Tren (“Intelligent Energy-Europe” programme), and published by Systèmes Solaires, Le Journal des Énergies Renouvelables.